The USD/INR currency pair is expected to showcase a supportive tone in the near-term given prospects of further interest rate cuts by the Reserve Bank of India (RBI) this year, according to the latest research report from Commerzbank.
The 16 members of the proposed ambitious trading bloc, known as the Regional Comprehensive Economic Partnership (RCEP), said last Sunday they still aim to conclude the agreement by the end of this year; RCEP consists of the 10 members of ASEAN (Association of Southeast Asian Nations) and its six trade partners, Australia, New Zealand, Japan, South Korea, India and most importantly, China.
However, it is clear that there are still major differences among members, most notably between India and China. India said it has reservations in joining the group. It sees concerns over China’s "protectionist policies" that has resulted in a trade deficit with China that has amounted to USD55 billion in 2018, the report added.
It seems Asian currencies are not placing much hope of a conclusion by year-end. There’s no great hope that the trading bloc will spur growth in the region and dial back the de-globalization trend.
For Southeast Asia, it seems they will keep the RCEP talks going but are also keen to catch the wave of relocation of supply chains out of China. This has indeed benefited Taiwan already. Southeast Asian currencies have in fact held up well vs USD so far this year, particularly THB.
"For India, it is desperate to seek a growth driver but it looks like concluding RCEP is not their immediate priority," Commerzbank further commented in the report.